Advanced Investment Management Settles Pension Loss
Claims

July 24, 2003 (PLANSPONSOR.com) - A now-defunct
Pittsburgh, Pennsylvania money manager has settled with a
number of pension funds, which sued over more than $425
million in investment losses, according to a Dow Jones news
report.

Citing settlement documents filed in the funds’ court
cases, the Associated Press said Advanced Investment
Management L.P. apparently could only muster about $14.7
million from cash on hand and insurance to pay back
the losses. That means that the settlements are
apparently only for about 3 ½ cents on the dollar.
Advanced closed in mid-2002 (See
Advanced Investment
Shutting Down
).

Advanced employed an enhanced-indexing strategy in which
index futures contracts and leverage were used in an
attempt to outperform a benchmark, such as the S&P 500
Index. The firm’s troubles began about a year ago when
several of its clients terminated their contracts and
pulled their money after accusing the firm of violating
written investment guidelines (See
Advanced Management
President/CIO Resigns in Wake of Controversy
). Advanced denied any wrongdoing at that time.

First Hits

San Bernardino County Employees’
Retirement
Association was one of the first to initiate legal
action against Advanced Investment Management last summer
(see
Calif. Pension Plan
Sacks Consultant
). Its account allegedly suffered a loss of $63.4
million after the
pension
fund had initially invested $460 million with Advanced. The
account of Contra Costa County Employee’s
Retirement
Association also appeared to take big hit, with a loss of
nearly $60 million on its initial investment of $287.3
million. It looks to get back about $2.1 million (see
Advanced Management
President/CIO Resigns in Wake of Controversy
).

Some of the companies whose
pension
assets were affected include such well-known names as Dow
Chemical Co, General Mills Inc. and Hershey Foods Corp.

According to the documents, Dow Chemical initially
invested about $248.6 million with the firm, and losses in
its Advanced account ended up totaling about $49.7 million.
Documents show Dow is due a payment of about $1.76 million
from the settlement.
General Mills lost about $30 million on its original
investment of $105.2 million, while Hershey lost $10.4
million after starting with roughly $90 million in its
Advanced account.

The settlement agreement indicates that Advanced
still doesn’t admit any “liability or responsibility at
any time for any purpose whatsoever,” and the agreement
“shall not be deemed to constitute an admission or
concession,” on the part of Advanced.